China’s rising oil demand is no dead-cat bounce: Kuwait

BENGALURU: Oil consumption in China, the world’s biggest importer, is rising strongly following the ending of coronavirus lockdowns, according to OPEC member Kuwait, reports Bloomberg. “There is pent up demand that accumulated over the pandemic,” Sheikh Nawaf Al-Sabah, chief executive officer of Kuwait Petroleum Corp, told Bloomberg TV in Bengaluru, India. “Now, with the opening up, we’re seeing an increase in demand that is sustainable. This is not a dead-cat bounce.”

Sheikh Nawaf Al-Sabah

Energy traders are watching China closely, saying the pace of its recovery will be the single-biggest factor determining price moves this year. Sheikh Nawaf’s comments are more optimistic than those he made in early December. Then, he told Bloomberg he was “really nervous” about oil demand and that Kuwait’s customers in Asia were reluctant to increase imports for this year.

Brent has dipped almost 7 percent since the end of December to just over $80 a barrel, mainly because data out of China has suggested the economic rebound is patchy. Still, Goldman Sachs Group Inc and Morgan Stanley are among analysts forecasting it will climb above $100 in the second half of the year.

Kuwait is the fourth-biggest crude producer in the Organization of the Petroleum Exporting Countries. It exports about 2 million barrels a day, or 2 percent of global supply, and China is its biggest buyer.

KPC, Kuwait’s national energy company, plans capital spending of around $80 billion over the next five years, the CEO said. That will help ensure Kuwait’s daily production capacity – now around 2.9 million barrels – reaches 3 million “very soon,” he said.

The company aims to get to 4 million barrels a day by 2035 and is considering setting up a trading arm, Sheikh Nawaf Al-Sabah said. If so, KPC would follow regional rivals such as Saudi Aramco, Qatar Energy and Adnoc of the United Arab Emirates, each of which has started or ramped up operations to buy and sell energy products in the last few years.

Kuwait aims to raise exports of refined products including diesel and jet fuel to Europe this year. Those extra volumes will go a small way to helping the continent deal with any shortages that arise from Sunday’s ban on almost all refined fuels from Russia, part of a strategy to punish Moscow for its invasion of Ukraine. “We are essentially bringing in a wall of distillates, diesel fuel oil to those markets, specifically into Europe, to fill up the supply gaps we are seeing,” Sheikh Nawaf Al-Sabah said.

Many of the extra flows will come from Kuwait’s massive, 615,000 barrel-a-day Al-Zour refinery. The first of three lines, or trains as they’re known in the industry, is now operating. The second should start producing fuels in the coming weeks and the last one in the second quarter, the CEO said. He was speaking from the India Energy Week forum, part of the country’s G20 presidency. – Bloomberg

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